Key Moments
- Deutsche Bank has raised its 2026 UK GDP growth forecast to 1.2% from 1.1%, reverting to the projection it held a month earlier.
- The bank now anticipates 0.2% quarter-on-quarter GDP growth in Q4 2025, instead of a previously expected contraction.
- Deutsche Bank continues to project the Bank of England’s policy rate at 3.25% by the end of 2026, compared with the current 3.75%.
Forecast Upgrade Driven by Stronger Data
Investing.com — Deutsche Bank has increased its forecast for UK gross domestic product growth in 2026 to 1.2%, up from 1.1%. The bank described this as a return to the outlook it held a month earlier, citing a run of stronger-than-expected macroeconomic data as the reason for the revision.
In a note published on Friday, the bank said it no longer expects the UK economy to contract in the fourth quarter of 2025. Instead, it now projects quarter-on-quarter growth of 0.2%, replacing what it previously characterized as a likely decline. The shift reflects upward revisions to earlier monthly figures and what the bank called a significant rebound in November GDP.
Sector Performance in November
November data indicated that the services sector recovered after recording a 0.3% contraction in October. At the same time, the production side of the economy posted a 1.1% month-on-month gain.
Within services, activity was supported by several key segments. Leisure output increased by 0.9%, information and communication rose by 1.6%, and professional services advanced by 1.7%. On the manufacturing side, output benefited from a sharp 25% jump in motor vehicle production as activity in the auto industry returned to more typical levels.
Not all sectors participated in the improvement. Construction output fell 1.3% month-on-month, marking a second straight monthly decline for the sector.
| Indicator / Sector | Latest Movement | Period / Comparison |
|---|---|---|
| 2026 UK GDP growth forecast (Deutsche Bank) | Raised to 1.2% from 1.1% | Full-year 2026 |
| Q4 2025 GDP (quarter-on-quarter) | Now projected at 0.2% growth | Revised from expected contraction |
| Services sector | Bounced back from 0.3% contraction | November vs October |
| Production sector | Up 1.1% month-on-month | November |
| Leisure (services) | Up 0.9% | November |
| Information and communication (services) | Up 1.6% | November |
| Professional services | Up 1.7% | November |
| Motor vehicle production | Up 25% | November |
| Construction output | Down 1.3% month-on-month | November (second consecutive decline) |
| Bank of England rate forecast (end-2026) | 3.25% | Current rate: 3.75% |
Expected Tailwinds for 2026
Looking ahead, Deutsche Bank highlighted several factors it views as supportive for UK growth in 2026. It pointed to a further decline in inflation, which it expects to move close to the central bank’s target level by spring, providing a lift to real disposable incomes.
The bank also referred to what it described as favorable credit conditions, as well as anticipated interest rate cuts by the Bank of England. Additional support, in its view, should come from higher public sector spending and the government’s efforts to deregulate certain areas of the economy.
Bank of England Policy Outlook
Deutsche Bank left unchanged its call for the Bank of England’s policy rate at the end of 2026. It continues to project that the rate will stand at 3.25%, down from the current level of 3.75%. According to the bank, this expected easing in policy is one component of the broader tailwinds it sees helping the UK economy over the forecast horizon.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
